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In Allen v. USAA Casualty Insurance Company, 25 Fla. L. Weekly Fed. C1329a, Case No. 14-13478 (11th Cir. June 25, 2015), the United States Court of Appeals for the Eleventh Circuit affirmed the district court’s holding under Florida law that an insurer is not required to obtain a policyholder’s written consent on a state-approved form before issuing building ordinance and law (BOL) coverage of greater than 25%.

In the class action complaint filed in this case, plaintiffs-appellants alleged that they obtained homeowner’s insurance from defendant in 2002, which included BOL coverage of 25% of their home’s value. In 2006, their BOL coverage increased to 50%, purchased from defendant on defendant’s form, which was not approved by the state. As class action representatives, they argued that Florida Statutes § 627.7011(2) and the Florida Administrative Code require that before issuing a policy with BOL coverage greater than 25%, an insurer must obtain a policyholder’s written consent on a state-approved form. They sought a declaratory judgment, permanent injunction, and damages from defendant for breach of contract, measured by the difference in the premiums that they would have paid for 25% rather than 50% BOL coverage. Defendant filed a motion to dismiss in response, arguing that Florida law does not require consent on an approved form before an insurer may provide 50% BOL coverage. The district court agreed and granted defendant’s motion, and this appeal followed.

Plaintiffs-appellants’ primary argument to the court on appeal was that § 627.7011(2) was enacted to ensure that homeowners were adequately but not excessively insured. They asserted that the statute sets 25% as the default level for BOL coverage and requires a policyholder’s written consent on a state-approved form in order to depart upward or downward from the 25% under subsection (2) of the statute, which provides that an insured’s “rejection or selection of alternative coverage shall be made on a form approved by the [Office of Insurance Regulation].” Plaintiffs-appellants asserted that the term “alternative coverage” refers to any increase or decrease from the 25%; defendant countered that the statute applies only when the insured refuses BOL coverage and imposes no restrictions on how a homeowner acquires BOL coverage greater than 25%.

The court found that subsection (1) of 627.7011 requires an insurer to offer insureds two options: replacement cost coverage excluding BOL coverage, or replacement cost coverage with either 25% or 50% BOL coverage, viewing subsection (2) of the statute as a gap-filling measure. Thus, a policy is deemed to include 25% BOL coverage unless the insurer obtains the policyholders’ written declination of such coverage. In support of its holding, the court relied on the provision of the statute requiring that the form “fully advise the applicant of the nature of the coverage being rejected.” If a homeowner selects coverage above 25%, the court noted, he would not be “rejecting” any coverage. The court noted further that that the statutory purpose of § 627.7011(2) is to decrease the prevalence of underinsurance, not excessive insurance, as the statute was passed in response to Florida’s property insurance crisis in the wake of Hurricane Andrew. Accordingly, the court found that subsection (2)’s form requirement does not apply when a policyholder selects BOL coverage greater than 25%.

Moreover, even if defendant had violated § 627.7011(2), Florida Statutes § 627.418(1) bars plaintiffs-appellants’ attempt to recover premium payments measured by the difference in the premiums paid for 25% rather than 50% BOL coverage. Under that provision, where a policy provides coverage beyond that required by Florida law, the court must enforce the terms of the contract as written. Given that plaintiffs-appellants contracted for and received 50% BOL coverage, the court opined that the plain language of § 627.418(1) bars their attempt to recover premium payments.